AFC Risk Management and Insurance 2

Question 1

A client's auto insurance has a $1,000 deductible. They file a $1,500 hail damage claim. How much will the insurer pay?

Accepted Answer

$500

Answer

$1,500

Answer

$1,000

Answer

$0 because hail is not covered

Question 2

Which risk management strategy involves choosing not to insure a particular risk because the potential loss is financially manageable?

Accepted Answer

Risk retention

Answer

Risk avoidance

Answer

Risk transfer

Answer

Risk reduction

Question 3

A client has employer life insurance at 2x salary ($160,000 on $80,000 income) with a non-working spouse and three children. Is this adequate?

Accepted Answer

No, the recommendation is 10-12 times income for this family situation

Answer

Yes, employer coverage is always sufficient

Answer

Yes, with Social Security survivor benefits

Answer

No, they need at least 20 times income

Question 4

What type of insurance protects a homeowner if a guest slips on their icy walkway and breaks a leg?

Accepted Answer

Liability coverage within the homeowner's policy

Answer

Property damage coverage

Answer

Medical payments coverage only

Answer

Comprehensive coverage

Question 5

A 60-year-old is evaluating long-term care insurance. What factor most significantly impacts premium cost?

Accepted Answer

Age at time of purchase

Answer

Gender

Answer

Insurance company reputation

Answer

State of residence

Question 6

What is the purpose of an elimination period in a disability insurance policy?

Accepted Answer

The waiting period between disability onset and when benefits begin, serving as a time-based deductible

Answer

Period after which the insurer can cancel

Answer

The initial enrollment period

Answer

The time to process a claim